GAFTA: Keeping the grain trade flowing

December 18, 2006
-
by World Grain Staff

Share This:

Organization has more than 1,000 members in 86 countries — and it continues to grow

by Chris Lyddon

The Grain and Feed Trade Association (GAFTA) is a body with a long history and a vital role in grain trading around the world. GAFTA contracts are central to many of the international trades that take place in the grains sector, and GAFTA’s disputes settlement procedures are a key to good trading relationships.

GAFTA’s role is growing to fit the changing demands of a changing world.

GAFTA’s President Finn Gundersen of Dansk Landsbrusk Grovvareselskab and its Council, made up of elected representatives from all over the world, guide the Association’s Secretariat headed by Director General Pamela Kirby Johnson OBE.

GAFTA has offices in London, England; Kiev, Ukraine; and Beijing, China, ensuring that it provides members with a truly international service. As the only international association representing the grain and feed trade worldwide, GAFTA plays a vital role in setting best practice standards and maintaining a low-cost bulk handling system, as well as ensuring that safe food and feed materials are supplied by its members.

GAFTA has more than a 1,000 members in 86 countries, and keeping up membership is vital to the organization’s global influence. Its membership has been steadily growing during the past decade.

TRADE ASSURANCE SCHEME

GAFTA’s most important development in the last two years has been introducing the GAFTA Trade Assurance Scheme (GTAS). "In 2002, we developed the GAFTA Best Practice Trading Manual," said Jeremy Smith, scheme manager. "Our members were increasingly being asked to provide evidence that they were trading and transferring goods in accordance with certain standards. It was just an off-the-shelf, voluntary scheme that GAFTA members could use. There was quite a lot of intellectual property in that.

"It was a success, but it needed to develop," he said. "The logical way forward was to turn it into an accredited audited scheme. The scheme needs to be certified by a recognized certification body, recognized, for example, by UKAS (the United Kingdom Accreditation Service) in the U.K."

The scheme is currently going through the accreditation process to achieve full international recognition.

"It was appropriate to substantially revise and change the format by splitting the original one big manual into a series of smaller volumes covering trading, brokerage, storage, transport, inspection, testing and fumigation," Smith said. "There is an overarching scheme manual; then the second tier is the seven manuals."

He noted that there is the option of adding extra manuals as necessary in the future. "If you’re a fumigator, inspector or storekeeper, you only need to seek accreditation to your particular manual. You ap- ply for certification and the certification body comes and audits you, and if you pass you’re certified. You’re then reaudited annually." The text of each manual is available on the GAFTA website (www.gafta.com).

The scheme is being audited by the certification body CMi, one of the largest inspection bodies working in the food sector. "We were advised that it would be an advantage to work with one certification body while we were working with the accreditation body," said Smith.

GAFTA’s scheme joins a range of assurance schemes affecting the grains market, but Smith believes that it can stand on its own. "The thing that sets this apart is that it covers the whole logistical range and that it’s international," he said. "We think that is its biggest selling point."

After spending a lengthy period of time getting the scheme documents right and going for accreditation, Smith believed that GTAS was set to take off. "Certain countries have a thirst for information and a desire to improve their procedures," he said. "Our GTAS will really go down well (with them). "What the trade doesn’t want is more costs involved in meeting regulations. With our scheme, we hope to avoid that. It’s your best defense for the application of due diligence." FOOD SAFETY

GAFTA’s scheme is based on HACCP principles, something Smith says is vital to keep it in line with modern food and feed regulations. "We constantly enhance and upgrade it to keep up with the fast-moving trade that we are in," he said. "We envisage an annual revision."

Food safety legislation has been a major concern for GAFTA members, particularly in Europe. Anne Nistad, head of trade policy, highlighted an issue that is of increasing concern. "We find that a lot of safety legislation has not been based on sound science but rather on protectionism," she said. "Our attention is focused on these issues around the world."

GAFTA concentrates on making sure its members are fully informed about upcoming legislation and its lobbying efforts "We inform members of upcoming legislation, trade issues, etc., through circulars which are sent out almost daily, as well as through our newsletter: GAFTAWorld," Nistad said. "It is vital for us to communicate with members. They don’t have time to work through the details of every proposal that comes out. This is very much a key role for GAFTA"

In order to help members and the trade generally meet safety requirements, GAFTA also runs superintendents and analysts’ schemes.

"The analysts’ scheme has been going since about 1994," Smith said. "The superintendent scheme was going before that. It’s very much connected with the GAFTA contracts. They require that you appoint GAFTA-approved superintendents and use GAFTA-approved analysts. Superintendents have to follow our sampling rules (No. 124), our weighing rules (No. 123) and the GAFTA Code of Good Practice for Superintendents and Surveyors."

GAFTA Approved Analysts must apply the GAFTA Analysis Methods (No. 130) and agree to follow the Code of Good Practice, "and in particular, they have to participate in a twice yearly proficiency test," Smith added.

CONTRACTS AND ARBITRATIONS

"My word is my bond" is the motto of the organization. With this in mind, GAFTA offers its members more than 80 separate GAFTA contract forms to fit different circumstances, according to GAFTA Head of Services Joanna Lees. "A substantial amount of world trade moves under these contract terms," she said. "They provide certainty and ease of trading."

GAFTA’s contract terms require the use of GAFTA-approved superintendents and analysts and also provide for arbitration.

"The dispute resolution service is world renowned," Lees said. "It is a commercial means of resolving disputes to which the trade can refer problems without going through the delay and expense of court action."

GAFTA provides arbitrators qualified by both experience within the trade and by training through the continuing professional development program.

"When considering the amount of goods moved under contracts incorporating GAFTA standard contracts, we have remarkably few disputes referred to us — about 200 a year," Lees said.

Within all of the standard contract forms provided by GAFTA is an arbitration clause incorporating the GAFTA arbitration rules. The object of this is to ensure that in the event of problems, the parties can resolve them quickly and cost effectively.

"The parties generally want to continue to trade," Lees said. "They want disputes resolved promptly and in a manner that enables them to continue their trading relationship." TRAINING

A vital part of GAFTA’s role is the training it provides; something which has grown enormously since the association expanded its Continuing Professional Development Program 11 years ago. GAFTA’s courses are truly international, said Lees, adding that "the whole point in facilitating trade and training is oriented toward that."

During the last year, the association has also introduced a distance-learning program via the internet. "It’s been prepared by experts with a legal and/ or trading background," she explained "There are six modules which you have to take in order. Each takes 10 to 14 weeks, with two to three hours of work to do each week. The aim is to look practically at all aspects of the trade.

"It answers questions like: When is a contract formed? What are the parties’ rights and responsibilities? Does the contract have to be in writing? Members of the trade want to follow the best practice. It facilitates trade."

The key question is what to do when it goes horribly wrong? "We look at wider issues than just the GAFTA contract," she said. "We aim to act as an information source for our members."

INTERNATIONAL PRESENCE

Lees explained that GAFTA is run by a series of committees. "Our policy is produced by the trade for the trade," she said. "For example, there is an international contract policy committee."

A rule that ensures that no more than two of its members come from any single country ensures that the committee represents practice around the world. "It is a truly international committee," she said. "Contracts must reflect international practice around the world. They must be neutral and not benefit either the buyer or the seller. All of the rules are written by trade experts."

Anne Nistad also emphasized the international role of the association. "Last year we opened an office in Kiev in Ukraine that has become very useful

in understanding the issues there," she said. "We also have an office in China. We have tried to be more and more international, to have eyes and ears everywhere."

On an international level, GAFTA makes representation on the World Trade Organization (WTO) and also at the Codex Alimentarius Commission.

"Like everyone, we were looking forward to an agreement within the framework of the WTO Doha Round to provide a global trading system. We are disappointed at the lack of commitment and impetus in the talks," she said.

"We’re finding that food policy worldwide is not coordinated at all. For example, with genetically modified foods and feeds there are different policies and legislation, and event approval happens at different rates. It has caused a lot of difficulties in the trade."

GAFTA is also a member of the International Grain Trade Coalition. "It is a coalition of worldwide associations, which includes, among others, the Canada Grains Council, North American Export Grain Association, APPAMEX and COCERAL," Nistad explained. "We meet regularly."

The group was originally set up to make sure that the Cartagena Protocol on Biosafety did not have an unexpected impact on trade. "It worked very well," she said. "The IGTC is looking at ways of widening its remit."